Monday, September 28, 2009

EPF VS UNIT TRUST

The media outcry over the past week about the losses suffered by investors who have withdrawn their EPF money to invest in mutual funds has been one-sided so far.

According to a report in Mingguan Malaysia on August 5, 2006, since 1996 the value of total funds withdrawn for investments have dwindled from RM9.76 billion to RM9.15 billion as at December 2005, and a loss of some RM600 million had been suffered. However no further information was provided as to how the figures have been derived.

This was followed by the predictable reactions from the powers-that-be calling for the EPF investments withdrawal schemes to be scrapped, tightening of procedure etc. Unfortunately, this is more of a reactive response than a well-thought through solution to solve the problem at hand.

There are three parties who are central to this issue:

The EPF who have seen significant increases in the number of withdrawals for the investment scheme over the years (The withdrawal figure touched RM2.1 billion in 2005)

The unit trust companies who have aggressively targeted EPF members to buy their funds over the years and want to continue to be able to do so

EPF members some of whom have lost and others, gained money from the mutual funds but all of whom we can assume thought they could get a higher return than that provided by the EPF by investing in the mutual funds

At the end of the day, I feel all that all three parties involved, including the EPF members should take some responsibility for what has transpired instead of the collective finger-pointing that’s going around.